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Will We 'Make' It?

If the government is to translate
the 'Make in India' campaign from a mere slogan to an actual strategy and a
movement, it will have to first understand that manufacturing is not an end in
itself. It is a means to the ultimate end of creating employment. Execution of
the PM's vision is not going to be easy. It will need a major change in
mindset. It will need a major partnership between the government and industry,
argues the President of the International Apparel Federation & President of
the Clothing Manufacturers Association of India, Rahul Mehta

Imagine a cricketer, once an
exciting player but now aged 45, having put on oodles of weight, too slow to
run singles or chase the ball till the fence, too late in reacting to the
bouncer, and too weak in eyesight to see the ball whiz past - trying to play in
today's T-20 match and hoping to do well.

That, unfortunately, was the case
with most of our exporters in 2005, when the quotas ended. They were
overconfident, unseeing of the inefficiencies built up in their organisations,
systems, and even thought processes, unaware of the changes taking place in the
industry around them, forgetful of the fact that their success and wealth was
more the result of their management of quotas rather than their management of business.

Undoubtedly, they were a brilliant
lot - bestowed with outstanding business acumen, sharp money sense, and
admirable decision-making ability. Unfortunately, they had built up their
skillsets in areas which were no longer relevant. Competition on a
level-playing field was not what they were accustomed to; reaching out to
customers who had other options was not their forte; buying technology because
it increased productivity - and not because it brought additional quotas - was
not their domain of experience.

And that is why we lost the golden
opportunity to capture the world apparel trade when quotas were lifted - a
combination of an overconfident industry, lack of preparedness, an
unimaginative and lethargic government, emerging competitors who did not carry
the baggage of a successful past, and countries whose dependence on apparel
exports denied them the luxury of being complacent.

Today, when the world is talking
about the electrifying impact of our Prime Minister and his dynamic slogan
'Make in India' - we are once again faced with a golden opportunity. Will we be
able to grab it? Will we able to convert promise into performance? Will we be
able to actually realise our potential and actually do something about the
opportunity that has presented itself? And if so, what does the government need
to do? What does the industry need to do?

First of all, both government and
industry - but more so the government - needs to understand that 'Make in
India' need not, should not, and cannot be restricted to export-based
industries. Unlike many other developing countries, India is blessed with a
huge domestic market potential. There is no reason today that growth needs to
be entirely export-led. Manufacturing for domestic markets generates as much

employment, growth, and
development as manufacturing for exports. It is essential, therefore, to
clarify at the very outset that the 'Make in India' campaign entails any
manufacturing - be it for the international or domestic markets.

Here is what I believe the government
needs to be doing:

• Clearly
define the goals of its programme - what does it want to achieve?

• Set
quantifiable targets along with timelines to achieve them.

• Identify
the industries that will best enable these goals/targets to be achieved. I
would call them 'strategic partner industries'.

• Understand
what exactly these industries need in order to increase its manufacturing
manifold. It is important for the government to realise that there are no 'fit
all' solutions.

• Provide
the environment and physical infrastructure needed for these industries to
succeed.

• Build
the political and legislative willpower to carry through its intentions.

Let us examine each of these:

• To
begin with, I think the government has to very clearly define its goals - as
distinct from its vision. The vision is clear - to persuade the world to make
India its manufacturing hub. What should this translate into? What are the
goals towards which this whole movement is directed? After all, increasing
manufacturing cannot be the end in itself. It is only a means by which a
desired end is met. The desired end could be world dominance in manufacturing,
or in a particular strategic industry. It could be economic dominance. Or - as
I believe it should be in India's case - a massive drive towards increase in
employment. The software revolution brought great prosperity to thousands of
Indians. It brought India back on the map of scientific, intellectual, and
managerial worlds. It was perhaps the single most responsible factor for
transforming India's image from one of snake charmers and elephants and Taj
Mahal to a modern, forward-looking nation. It created jobs, but for a few, for
the educated, for the urban. But it still left millions of semi-literate,
semi-skilled and unskilled poor to fend for themselves. India still needs to
create an environment where these people can progress - in which they can share
the fruits of growth. And, outdated socialistic models of dole and handouts do
not work. For these millions of unemployed and under employed, the only way
forward is to provide employment. That must be the goal of the entire 'Make in
India' campaign - increase employment.

• What
are the employment numbers the government is looking at? At which levels of
economic prosperity? Is it at least partly gender-specific or irrespective of
gender? Again, sectoral targets are important because the strategic partner
industries could vary, based on which sectors the government wants to promote.
And to these targets to be meaningful, they have to be time bound. They have to
be specific - not merely expressions of good intent.

• Based on the goals it sets
for itself, the government then needs to identify the strategic partner
industries which would form the core of its 'Make in India' vision. Any and all
manufacturing activity in India will increase employment, but some industries
will serve the set goals better than others. For instance, if employment of
women is an important goal, industries such as apparel would make more
strategic sense than, say, steel. The same would be the case if employment at
the lower strata, among the semi-skilled and unskilled levels is the goal. In
that case too, the apparel industry would be the ideal choice. Similarly, if
employment of graduates is a goal, encouragement of software industry would be
more appropriate. It is important therefore that the clear definition of goals
is matched by and followed up with a strategic identification of the most
relevant industries that would help in achieving these goals.

• Once
these industries are identified, the government and industry need to sit down
and understand what that industry actually needs to expand manufacturing.
There are no 'one size fits all' solutions here. The experience with the
textiles ministry's TUF scheme is a classic example. While it was a fantastic
scheme for the spinning industry, it got very little response from the apparel
industry - simply because the capital investment in the apparel industry is not
such that a small reduction in the interest cost would enthuse someone to
invest; the apparel manufacturer's critical concerns are working capital
interest costs. A five per cent reduction in working capital interest could
have got a far more response than in capital cost.

• It
is also critical for the government to realise that merely giving a few
concessions or sops to industry is not going to change India into an
international manufacturing hub overnight. A change in the overall working
ethos, the ease of doing business, a labour regime which supports job creation
rather than protection to a few, support of the "babudom" in
resolution of problems, a partnership rather than adversarial approach to
business - all will be required if indeed the campaign is to succeed. To put it
simply, an environment will have to be created where business is easy to
conduct, where genuine problems are quickly addressed, and solutions worked
out. Needless to say, physical infrastructure - again as relevant to the
strategic partner industries - has to be built.

• Government
will have to provide political and legislative consistency to encourage
industry - especially to attract foreign investors. Policies which require
individual states to accept or reject, which can be reversed at every change of
government, will surely not tempt industry to invest - be it foreign or Indian.
Clarity, consistency and sustainability are cornerstones of any policy, which
is expected to encourage investment and growth.

In short, if the government is to
translate the 'Make in India' campaign from a mere slogan to an actual strategy
and a movement, it will have to first understand that manufacturing is not an
end in itself. It is a means to the ultimate end of creating employment, and
along with that have a clear strategy of where it wants to have that
employment, identify the industries which most creates employment in this
segment, and understand what exactly these industries need to expand their
manufacturing bases. Finally, it will have to take a holistic, 360-degree
perspective to provide a comprehensive support environment for the industry to
grow and flourish.

However, even given all the above
from the government, it will require a huge effort from industry if the PM's
dream is to fructify.

Purely from the perspective of the
apparel industry, here is what I believe industry will need to do:

• Approach
their business as an industry, requiring long-term investment and nurturing -
not merely as a short-term trading opportunity.

• Look
at government support as mere stepping-stones - the first steps to remove
hurdles, and not as the core of its business strategy.

• Operate
the business at international scale.

• Focus
on productivity improvement as a core business tool - not as a mere fad.

• Broaden
its product and market basket.

• Understand
the changed market character and gear itself to face it.

The government at best can play
the role of a catalyst. It can provide an environment, which can be utilised,
taken advantage of. It cannot actually conduct the business. This is best left
to industry. And industry will have to rise to the occasion.

• To
begin with, it will have to view business as building an industry, and not as a
trading opportunity. And what is the difference? An industry requires
investment. It implies a gestation period. It involves effort - often without immediate
returns - over a sustained period. A trading opportunity on the other hand,
while not a "fly by night" operation, is often short term, promising
quick returns, without too much of sustained effort over a long period. Perhaps
I am being too harsh, but too often, our apparel manufacturers lack long-term
vision. They are good at exploiting short-term opportunities, but lack the
patience and perseverance to build an industry. There are many who excel at
manufacturing for others, but lack the tenacity to build their own brands. This
needs to change. Industry needs to understand that trading can be done by
outsourcing production to smaller units. Industry can only be built by creating
factories. Profits can be made from manufacturing for others. Value can only be
created from brand building.

• Too
often in the past, the apparel industry's performance has been directly linked
with the introduction or withdrawal of government schemes. Very few from
industry used government support to build foundations of strong businesses.

For instance, many garment
exporters flourished while the income tax exemption was in place only to lose
interest once tax was payable once again. Only a few of the leading players
during the quota regime are industry leaders today. This is because they used
government schemes to build profitable businesses, not sustainable industries.
Again, this mindset needs to change. Demand concessions by all means. Insist on
level-playing conditions certainly but to build strong foundations, which can
survive after these concessions. Government support cannot be in perpetuity.

• The Indian apparel industry,
both exports as well as domestic, has traditionally been afraid of scale.
Unfriendly labour laws, a risk-averse nature, uncertainty of government
policies, have all led industry to build small, stand-alone units, incapable of
reaching the size, scale, or in probability, the quality standards required to
be internationally competitive. The issues are all valid, the fears not totally
unjustified but surely, other industries have managed to cope with the same
constraints. If the others can manage, why can't we? If we analyse business
models of some of the other countries who have been more successful in
increasing their share in the apparel trade, large-sized factories form an
integral part of their strategy

• Improving productivity has for
too long been considered a topic for discussion in seminars and conferences,
and not taken too seriously by senior management except as a passing fad. In
the increasing competitive world of today, the buyer or consumer virtually
takes all the cost decisions for you - worker wages and benefits, working
conditions, and even the final selling price, the only differentiating factor
in one's control is the productivity per worker. Productivity is no longer one
of the determining factors of profitability - it is the ONLY factor left in the
manufacturer's control. The world is far too competitive today to ignore or
even minimise its importance. If Indian manufacturers do not take a very, very,
hard look at productivity, I am afraid lofty ideas will remain ideas.

• For too long the Indian apparel
manufacturers, whether in the export or the domestic sector, have focused on
too narrow a segment. Most exporters today concentrate on the US or the EU
markets; similarly, domestic brands focus too much on metro markets. This will
have to change. They will have to broaden their basket of markets. Exporters
will have to look at the Far East and Australian/New Zealand markets, they will
have to explore the South American markets and the Eastern European regions.
For sure, these markets will not be as large as existing markets but they
will be needed to expand India's share in world trade. Indian brands too will
have to recognise that tier 2 and 3 markets are the ones that are growing at a
faster rate and will be the markets of the future. They can ignore these
markets only at their peril.

• Similarly, and this is far more
relevant to exporters, there is the need to expand the product basket. India
simply cannot hope to increase its share in world trade unless it expands its
product base to include man-made fibres, winter clothing, and formal clothing.

• The world is evolving. It is
moving on. Industry will have to move with it. It will have to accept the new
features, new characteristics, new parameters, and learn to cope with them. We
will need to learn to build these in our business strategies and models.
Whether it is extended credits, pre-committed inventories, sale or return
buying pattern these will have to be worked upon. We need to accept that mere
stitching facilities is not what the buyer is looking for today designing,
trend forecasting, stock replenishment are all part of routine expectations
of buyers today. These cannot be simply opposed. These will have to be brought
into our skillsets.

So, one will have to
accept the cold fact that execution of the PM's vision of 'Make in India' is
not going to be easy. It will not be automatic. It will have to be worked upon.
It will need a major change in mindset. It will need a major partnership
between the government and industry. But, if all parties set their mind on it,
it is possible. If we are all in agreement on 'Make in India', WE WILL MAKE IT.

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